Vapes and extracts continue to eat into dried flower’s market share

Cannabis vapes first became available on the legal Canadian market in early 2020, and recent data suggests that vapes and extracts have captured a larger share of the market and penetrated flower sales over the past two years.

The national data reflect this trend. Health Canada’s 2022 Canadian Cannabis Survey asked consumers how they use cannabis. It allowed multiple answers and found that while smoking flower was still the most common form of consumption at 70% of consumers, this represented a 74% decrease in 2021.

In comparison, vaping via a vape pen or e-cigarette increased from 28% in 2021 to 31% in 2022.

“In the Canadian market, along with the cannabis market as a whole, the popularity of florals is being eroded by newer categories,” said Mitchell Laferla, analyst at Headset. “Pre-rolls in particular are capturing a large market share of flowers.”

Infused pre-rolls in particular play a special role in this changing market, contributing to the overall increase in extracts and decline in flowering.

Headset, in its report “Cannabis Trends in 2022: A Year in Review,” noted that infused pre-rolls “have gained traction in Canada,” growing 1,426%, with all-in-one disposable vape pens have grown by 160%. This is helping fuel the impressive growth of extracts, which has seen ebbs and flows over the years but regularly topped 3.2 million packaged units in 2022, according to federal data.

We can see this in data from BC, where dried flower sales are offset by increases in other categories, with inhalable extracts up 62%.

Despite being a small market, the Yukon’s annual reports also show percentage declines in flower sales while demand for extracts is growing. Extracts represented revenue of $1,465,499 in 2022 compared to $1,173,853 in 2021, representing a 24.8% year-over-year growth. In 2021, extracts accounted for 19.3% of total sales, and in 2022, that jumped to 20.7%.

While total flower sales in the Yukon rose from $4,587,779 to $5,054,399, a 10.2% increase in dollar value, the relative percentages were not as impressive. On a US dollar basis, flowers fell from 75.6% of the Yukon market in 2021 to 71.3% in 2022, despite a 24.7% increase in volume.

Alberta, which releases vape sales data, tells a similar story. The latest available data is from 2020-21. This increased flower sales from $168,629 to $237,913, an impressive 41%; However, the share of flowers in total sales fell from 63.5% to 50.7%. In comparison, vape sales increased from $8,775 to $79,157, a staggering 802%, and as a percentage, vape sales increased from 3.3% to 16.9%.

In Quebec, too, the number of cannabis users using vapes is increasing. In 2022, 24% of Quebec consumers used vapes, compared to just 19% in 2021.

Better quality, more choice

As the market for vapes grows so does the quality, which has been an issue with some products. While the Ontario Cannabis Store (OCS) noted that e-cigarette sales were stable at 16% of market share in the fourth quarter of 2021 (latest data), they also noted that “Complaints for e-cigarettes compared to last year decreased by 29 percent”. Notably, the total number of complaints fell from 1,880 to 1,336 in the quarter.

The marketplace is also characterized by an increasing selection.

“We know consumers like to try new things,” said Adam Coates, chief revenue officer at Decibel Cannabis, Canada’s sixth-largest licensed operator by market share, which owns the General Admission vape brand. “Every four to six months we release new flavor profiles and we discontinue a few others.”

This approach seems to work. According to the latest headset data, General Admission vapes are in four of the top five spots for Ontario’s top-selling cannabis vape pens.

“We believe our products are popular because we care about potency, flavor, convenience and freshness,” says Coates. “At General Admission Vapes, we take a second step and use fractional distillation, which brings our THC levels into the 84% to 90% range—well above the typical 78% to 82% we see elsewhere on the market. “

Coates confirms that flower as a category is declining in terms of market share and that while vape demand remains strong, overall there is a larger movement in extracts driven by infused pre-rolls.

“Consumers like the quality and potency of fortified pre-rolls,” he says. “We believe the pre-roll market, which now accounts for about 27% share in the pre-roll category, could grow to 50% with Qwest and General Admission – two Decibel brands – playing an active role .”

Increased demand is not only seen in the direct selling of cannabinoid-infused products, but also in the reusable hardware that many people rely on to consume concentrates.

“Concentrate vaporizers are more popular now than ever,” says Sachin Arora, president of The Herb Cafe, which sells vape hardware like vape carts, dry herb vaporizers, electric dab rigs, and digital e-rigs. “Cartridges and car batteries are currently very hot.”

Regarding these products, Arora says the trend is towards the technologies that allow for the easiest delivery.

“The potency of concentrates is at an all-time high – no pun intended,” he says. “Our products look like e-cigarettes, so they blend in seamlessly with the public and don’t need to be charged and recharged on the go.”

It is this ease of use and potency that contributes to the appeal of vaporizers, while also making the products well-suited to the demands of the Canadian climate.

“We view vape pen demand as a need state or an ad hoc basis, as opposed to a demand profile for a specific demographic,” says Decibel’s Coates. “It’s more discreet, with controlled dosing, which lends itself to indoor use in winter.”